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'Effects test' to proceed

The Turnbull government has announced plans to implement the most controversial recommendation of the Harper Review into competition law. Under the measure, the existing misuse of market power prohibition in the Competition and Consumer Act will be replaced with one based on an “effects test”.

In a surprising move, the Turnbull government has announced plans to implement the most controversial recommendation of the Harper Review into competition law. Under the measure, the existing misuse of market power prohibition in the Competition and Consumer Act will be replaced with one based on an “effects test”.

The Harper Review, in recommending that Section 46 be replaced, found that the current provision is not reliably enforceable and permits anti-competitive conduct. According to the government, the new provision will make it easier for a small business to prove that a large competitor has misused its market power.

The new provisions will prohibit a corporation with substantial power in a market from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in that or any other market.

Many in the business community have argued that the proposed change will have a chilling effect on competition as larger companies will become more cautious for fear of contravening the new provision. Certainly, there is the potential for more claims; however, it will still be a significant task to prove that particular conduct is likely to cause a substantial lessening of competition in a market.

While no draft legislation has been released, it can be expected that the new provisions will reflect the model provisions recommended by the Harper Review panel.

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